Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Tim Hortons Inc. | a3q13form8-kearningsrelease.htm |
| EX-99.3 - EXHIBIT 99.3 - Tim Hortons Inc. | a3q13thi993safeharbor.htm |
| EX-99.2 - EXHIBIT 99.2 - Tim Hortons Inc. | a3q13thiex992dividenddecla.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE (Unaudited. All amounts in Canadian dollars and presented in accordance with U.S. GAAP.)
Tim Hortons Inc. announces 2013 third quarter results:
Continued progress in same-store sales and EPS growth
Financial & Sales Highlights
Performance | Q3 2013 | Q3 2012 | % Year-over-Year Change | YTD 2013 | ||||||
Total revenues | $ | 825.4 | $ | 802.0 | 2.9% | $ | 2,357.0 | |||
Operating income | $ | 168.8 | $ | 153.7 | 9.9% | $ | 473.3 | |||
Adjusted operating income(1) | $ | 169.8 | $ | 162.2 | 4.7% | $ | 484.4 | |||
Effective tax rate | 28.3 | % | 26.7 | % | 27.3 | % | ||||
Net income attributable to THI | $ | 113.9 | $ | 105.7 | 7.7% | $ | 323.8 | |||
Diluted earnings per share attributable to THI (“EPS”) | $ | 0.75 | $ | 0.68 | 10.7% | $ | 2.12 | |||
Fully diluted shares | 150.9 | 155.1 | (2.7)% | 152.9 | ||||||
(All numbers in millions, except EPS and effective tax rate. All numbers rounded.)
(1) | Adjusted operating income is a non-GAAP measure, and excludes corporate reorganization expenses of $1.0 million in Q3 2013 ($11.0 million YTD 2013) and $8.6 million in Q3 2012 ($9.8 million YTD 2012). Please refer to “Information on non-GAAP Measure” and the reconciliation information in footnote (3) of this release for details of reconciling items. |
Same-Store Sales(2) | Q3 2013 | Q3 2012 | YTD 2013 |
Canada | 1.7% | 1.9% | 0.9% |
U.S. | 3.0% | 2.3% | 1.3% |
(2) | Includes average same-store sales at Franchised and Company-operated locations open for 13 months or more. Substantially all of our restaurants are franchised. |
Highlights
• | Same-store sales growth rates improved compared to previous quarter |
• | Introduction of new single-serve coffee platform and new lunch offerings contributed to sales growth |
• | Company secures one-year $400 million revolving bank facility and anticipates obtaining longer-term financing during the fourth quarter |
OAKVILLE, ONTARIO, (November 7, 2013): Tim Hortons Inc. (TSX: THI, NYSE: THI) today announced results for the third quarter ended September 29, 2013.
1
"I am pleased to see continued progress in our business, including improving sales and profitability, despite a challenging operating environment," said Marc Caira, president and CEO. "Our same-store sales growth was particularly strong in our U.S. business. We still have more work ahead of us as we position Tim Hortons for sustainable and profitable growth in today's competitive reality, and we continue to develop our comprehensive strategic roadmap."
Consolidated Results
All percentage increases and decreases represent year-over-year changes for the third quarter of 2013 compared to the third quarter of 2012, unless otherwise noted.
Systemwide sales(4) increased 5.3% on a constant currency basis. This growth resulted from new restaurant development in Canada and the U.S., and from same-store sales growth of 1.7% in Canada and 3.0% in the U.S.
Total revenues increased 2.9% to $825.4 million compared to $802.0 million last year. The revenue growth rate was below that of systemwide sales due to a 0.3% decline in distribution sales, the largest component of revenues, driven primarily by lower commodity costs and corresponding decreases in pricing we charged to restaurant owners.
Variable interest entities ("VIEs") sales increased 12.4%. While the number of non-owned restaurants consolidated for accounting purposes has decreased since the start of fiscal 2013, it remains higher than it was a year ago.
Rents and royalties grew by 5.2%, consistent with the growth in systemwide sales. Franchise fees increased by 17.3%, due to an increase in renovations and restaurant resales, partially offset by fewer restaurant openings.
Total costs and expenses increased 1.3%, growing at a rate below that of revenue due to lower corporate reorganization costs, a moderate increase in cost of sales and a decrease in general and administrative ("G&A") expense.
Cost of sales increased by 0.9%, below the growth rate of revenue, as the effects of higher sales volumes were more than offset by lower underlying commodity costs. Operating expenses increased by 7.0%, due primarily to higher depreciation and rent associated with new properties, and the depreciation impact of the digital menu board program. Franchise fee costs increased by 18.0% due to increased renovation activity, partially offset by lower costs associated with fewer restaurant openings.
G&A expenses decreased by 5.2% due to lower salaries and benefits, driven by vacancies, most of which have now been filled, and lower stock-based compensation expense.
We recognized an asset impairment charge of $2.9 million this quarter, relating to certain underperforming markets in the U.S., with $2.5 million applied to the U.S. operating segment and $0.4 million recorded in VIEs.
In the third quarter of 2012, we incurred $8.6 million of corporate reorganization expenses relating to termination costs, CEO transition costs and professional fees. Corporate reorganization expense was $1.0 million in the third quarter of 2013.
2
Operating income of $168.8 million was up 9.9% from $153.7 million in the third quarter of 2012. The growth was largely the result of an increase in systemwide sales, as well as a decrease in corporate reorganization and G&A expenses. Adjusted operating income(3), which excludes the impact of the corporate reorganization expenses, increased 4.7% to $169.8 million. (Please refer to “Information on non-GAAP Measure” below for a reconciliation of adjusted operating income to operating income, the most directly comparable GAAP measure).
Net income attributable to Tim Hortons Inc. was $113.9 million, an increase of 7.7% from $105.7 million a year earlier. The improvement resulted from higher operating income, partially offset by a higher effective tax rate.
EPS of $0.75 grew by $0.07 or 10.7% due to the increase in net income attributable to THI, as well as the positive, cumulative impact of our share repurchase programs. The asset impairment charge and corporate reorganization expenses negatively impacted EPS by $0.02 in in Q3 2013, and corporate reorganization expenses negatively impacted EPS by $0.04 in Q3 2012. On average we had 2.7% fewer fully-diluted common shares outstanding in the third quarter compared to the same period last year.
Segmented Performance Commentary
We delivered positive same-store sales growth in the third quarter despite ongoing challenges in the operating environment. We believe uncertainty surrounding the rate of economic recovery continues to impact consumer confidence and discretionary spending in both Canada and the U.S, which has also resulted in a competitive environment that remains intensified.
We have reclassified the segment data for the third quarter of 2012 to conform to the current period’s presentation, which has been revised consistent with changes to our reportable segments announced earlier this year.
Canada
Same-store sales in our Canadian segment grew by 1.7%. The increase was driven by gains in average cheque resulting primarily from pricing, and to a lesser extent, favourable product mix. The decline in same-store transactions has slowed over the course of 2013.
Operating income in the Canadian segment was $179.6 million, an increase of $7.6 million or 4.4%. Systemwide sales growth of 4.7% in Canada led to higher rents and royalties income and a higher allocation of supply chain income. We opened 34 restaurants in Canada in the third quarter.
United States
U.S. same-store sales increased by 3.0% in the quarter, driven primarily by an increase in transactions.
Operating income was $2.7 million in the U.S. segment, an increase of $1.3 million from the third quarter of 2012. The asset impairment charge had a negative impact of $2.5 million on segment operating income in the third quarter of 2013. The U.S. segment benefited from systemwide sales growth of 10.8%, which led to increased rents and royalties revenues and a higher allocation of supply chain income. The U.S. supply chain allocation also benefited from favourable product margin variability. We opened 13 restaurants in the U.S. during the quarter.
Corporate services
The Corporate services segment incurred an operating loss of $14.3 million, compared to a loss of $13.0 million in the third quarter of 2012. The primary driver of the higher operating loss was
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a reversal of favourable product margins associated with our supply chain management activities recognized in the first half of 2013. Lower G&A expenses, due mainly to lower salaries and benefits, contributed favourably during the quarter.
Our international partner, Apparel FZCO, opened 4 restaurants in the Gulf Cooperation Council (GCC) during the quarter, including the first Tim Hortons restaurant in Kuwait.
Significant Developments & Initiatives
New Financing
In August 2013, the Board of Directors approved a $900 million increase in debt levels of the Company, intended to be used to repurchase common shares to create value for shareholders. We are targeting a total of $1 billion in share repurchases in the 12-month period to August 2014, subject to market conditions, the negotiation and execution of agreements, and regulatory approvals.
In October 2013, we entered into a one-year, $400.0 million revolving bank facility, to provide interim financing as we finalize alternatives for the increase in our long-term debt levels, and to fund the expanded share repurchase program, which commenced in September 2013.
We anticipate obtaining longer-term financing for a portion of the $900 million increase in the fourth quarter of 2013, subject to the negotiation and execution of agreements, and barring any unforeseen changes in market conditions. We expect to provide further details upon completion of a transaction.
Board declares dividend payment of $0.26 per common share
On November 6, 2013, the Board of Directors declared a quarterly dividend of $0.26 per common share, payable on December 10, 2013 to shareholders of record as of November 25, 2013. Dividends are declared and paid in Canadian dollars to all shareholders with Canadian resident addresses. For U.S. resident shareholders, dividends paid will be converted to U.S. dollars based on prevailing exchange rates at the time of conversion by Tim Hortons for registered shareholders and by Clearing and Depository Services Inc. for beneficial shareholders.
Tim Hortons conference call today at 11:00 a.m. (EST) Thursday, November 7, 2013.
Tim Hortons will host a conference call today to discuss third quarter results, scheduled to begin at 11:00 a.m. (EST). The dial-in number is (416) 641-6712 or (800) 773-0497. No access code is required. A simultaneous web cast of the call, including presentation material, will be available at www.timhortons-invest.com. A replay of the call will be available until November 14, 2013 and can be accessed at (416) 626-4100 or (800) 558-5253. The call replay reservation number is 21675888. The call and presentation material will also be archived for a period of one year in the Events and Presentations section of our website.
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Safe Harbor Statement
Certain information in this news release, particularly information regarding future economic performance, finances, and plans, expectations and objectives of management, and other information, constitutes forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer to all of these as forward-looking statements. Various factors including competition in the quick service segment of the food service industry, general economic conditions and others described as “risk factors” in the Company’s 2012 Annual Report on Form 10-K filed February 21, 2013, and our Quarterly Report on Form 10-Q expected to be filed on November 7, 2013 with the U.S. Securities and Exchange Commission and Canadian Securities Administrators, could affect the Company’s actual results and cause such results to differ materially from those expressed in, or implied by, forward-looking statements. As such, readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as to management’s expectations as of the date hereof.
Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about: the absence of an adverse event or condition that damages our strong brand position and reputation; the absence of a material increase in competition or in volume or type of competitive activity within the quick service restaurant segment of the food service industry; our ability to obtain financing on favourable terms; our ability to maintain investment grade credit ratings; prospects and execution risks concerning our U.S. market strategy; general worldwide economic conditions; cost and availability of commodities; the ability to retain our senior management team or the inability to attract and retain qualified personnel; continuing positive working relationships with the majority of the Company’s restaurant owners; the absence of any material adverse effects arising as a result of litigation; and there being no significant change in the Company’s ability to comply with current or future regulatory requirements.
We are presenting this information for the purpose of informing you of management’s current expectations regarding these matters, and this information may not be appropriate for any other purpose. We assume no obligation to update or alter any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. Please review the Company's Safe Harbor Statement at www.timhortons.com/ca/en/about/safeharbor.html.
(3) Information on non-GAAP Measure
Adjusted operating income is a non-GAAP measure. Management uses adjusted operating income to assist in the evaluation of year-over-year performance and believes that it will be helpful to investors as a measure of underlying operational growth rates. This non-GAAP measure is not intended to replace the presentation of our financial results in accordance with GAAP. The Company’s use of the term adjusted operating income may differ from similar measures reported by other companies. The reconciliation of operating income, a GAAP measure, to adjusted operating income, a non-GAAP measure, is set forth in the table below:
Reconciliation of Adjusted Operating Income
Q3 2013 | Q3 2012 | YTD 2013 | YTD 2012 | |||||||||
(in millions) | (in millions) | |||||||||||
Operating income | $ | 168.8 | $ | 153.7 | $ | 473.3 | $ | 444.1 | ||||
Add: Corporate reorganization expenses | 1.0 | 8.6 | 11.0 | 9.8 | ||||||||
Adjusted operating income | $ | 169.8 | $ | 162.2 | $ | 484.4 | $ | 454.0 | ||||
______________
All numbers rounded
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(4) Total systemwide sales growth includes restaurant level sales at both Company-operated and Franchised restaurants. Approximately 99.6% of our systemwide restaurants were franchised as at September 29, 2013. Systemwide sales growth is determined using a constant exchange rate where noted, to exclude the effects of foreign currency translation. U.S. dollar sales are converted to Canadian dollar amounts using the average exchange rate of the base year for the period covered. For the third quarter of 2013, systemwide sales on a constant currency basis increased 5.3% compared to the third quarter of 2012. Systemwide sales growth in Canadian dollars, including the effects of foreign currency translation, was 5.7% in the third quarter of 2013. Systemwide sales are important to understanding our business performance as they impact our franchise royalties and rental income, as well as our distribution income. Changes in systemwide sales are driven by changes in average same-store sales and changes in the number of systemwide restaurants, and are ultimately driven by consumer demand.
We believe systemwide sales and same-store sales growth provide meaningful information to investors regarding the size of our system, the overall health and financial performance of the system, and the strength of our brand and restaurant owner base, which ultimately impacts our consolidated and segmented financial performance. Franchised restaurant sales are not generally included in our Condensed Consolidated Financial Statements (except for certain non-owned restaurants consolidated in accordance with applicable accounting rules). The amount of systemwide sales impacts our rental and royalties revenues, as well as distribution revenues.
Tim Hortons Inc. Overview
Tim Hortons is one of the largest publicly-traded restaurant chains in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, hot and cold specialty drinks (including lattes, cappuccinos and espresso shots), specialty teas and fruit smoothies, fresh baked goods, grilled Panini and classic sandwiches, wraps, soups, prepared foods and other food products. As of September 29, 2013, Tim Hortons had 4,350 systemwide restaurants, including 3,500 in Canada, 817 in the United States and 33 in the Gulf Cooperation Council. More information about the Company is available at www.timhortons.com.
For Further information:
Investors: Scott Bonikowsky, (905) 339-6186 or bonikowsky_scott@timhortons.com
Media: Alexandra Cygal, (905) 339-5960 or cygal_alexandra@timhortons.com
6
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands of Canadian dollars, except share and per share data)
(Unaudited)
Third quarter ended | ||||||||||||||
September 29, 2013 | September 30, 2012 | $ Change | % Change | |||||||||||
Revenues | ||||||||||||||
Sales | $ | 575,780 | $ | 568,541 | $ | 7,239 | 1.3 | % | ||||||
Franchise revenues | ||||||||||||||
Rents and royalties | 212,114 | 201,556 | 10,558 | 5.2 | % | |||||||||
Franchise fees | 37,459 | 31,943 | 5,516 | 17.3 | % | |||||||||
249,573 | 233,499 | 16,074 | 6.9 | % | ||||||||||
Total revenues | 825,353 | 802,040 | 23,313 | 2.9 | % | |||||||||
Costs and expenses | ||||||||||||||
Cost of sales | 501,856 | 497,617 | 4,239 | 0.9 | % | |||||||||
Operating expenses | 78,307 | 73,205 | 5,102 | 7.0 | % | |||||||||
Franchise fee costs | 37,865 | 32,083 | 5,782 | 18.0 | % | |||||||||
General and administrative expenses | 38,787 | 40,913 | (2,126 | ) | (5.2 | )% | ||||||||
Equity (income) | (4,075 | ) | (3,951 | ) | (124 | ) | 3.1 | % | ||||||
Corporate reorganization expenses | 953 | 8,565 | (7,612 | ) | n/m | |||||||||
Asset impairment | 2,889 | — | 2,889 | n/m | ||||||||||
Other (income) expense, net | (57 | ) | (51 | ) | (6 | ) | 11.8 | % | ||||||
Total costs and expenses, net | 656,525 | 648,381 | 8,144 | 1.3 | % | |||||||||
Operating income | 168,828 | 153,659 | 15,169 | 9.9 | % | |||||||||
Interest (expense) | (9,406 | ) | (8,509 | ) | (897 | ) | 10.5 | % | ||||||
Interest income | 919 | 760 | 159 | 20.9 | % | |||||||||
Income before income taxes | 160,341 | 145,910 | 14,431 | 9.9 | % | |||||||||
Income taxes | 45,386 | 38,956 | 6,430 | 16.5 | % | |||||||||
Net income | 114,955 | 106,954 | 8,001 | 7.5 | % | |||||||||
Net income attributable to non-controlling interests | 1,092 | 1,256 | (164 | ) | (13.1 | )% | ||||||||
Net income attributable to Tim Hortons Inc. | $ | 113,863 | $ | 105,698 | $ | 8,165 | 7.7 | % | ||||||
Basic earnings per common share attributable to Tim Hortons Inc. | $ | 0.76 | $ | 0.68 | 0.08 | 10.7 | % | |||||||
Diluted earnings per common share attributable to Tim Hortons Inc. | $ | 0.75 | $ | 0.68 | 0.07 | 10.7 | % | |||||||
Weighted average number of common shares outstanding (in thousands) – Basic | 150,342 | 154,478 | (4,136 | ) | (2.7 | )% | ||||||||
Weighted average number of common shares outstanding (in thousands) – Diluted | 150,864 | 155,067 | (4,203 | ) | (2.7 | )% | ||||||||
Dividends per common share | $ | 0.26 | $ | 0.21 | 0.05 | |||||||||
7
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands of Canadian dollars, except share and per share data)
(Unaudited)
Year-to-date period ended | ||||||||||||||
September 29, 2013 | September 30, 2012 | $ Change | % Change | |||||||||||
Revenues | ||||||||||||||
Sales | $ | 1,668,229 | $ | 1,655,615 | $ | 12,614 | 0.8 | % | ||||||
Franchise revenues | ||||||||||||||
Rents and royalties | 608,857 | 580,715 | 28,142 | 4.8 | % | |||||||||
Franchise fees | 79,943 | 72,575 | 7,368 | 10.2 | % | |||||||||
688,800 | 653,290 | 35,510 | 5.4 | % | ||||||||||
Total revenues | 2,357,029 | 2,308,905 | 48,124 | 2.1 | % | |||||||||
Costs and expenses | ||||||||||||||
Cost of sales | 1,452,302 | 1,455,437 | (3,135 | ) | (0.2 | )% | ||||||||
Operating expenses | 231,026 | 211,444 | 19,582 | 9.3 | % | |||||||||
Franchise fee costs | 83,743 | 77,159 | 6,584 | 8.5 | % | |||||||||
General and administrative expenses | 115,493 | 122,608 | (7,115 | ) | (5.8 | )% | ||||||||
Equity (income) | (11,340 | ) | (11,056 | ) | (284 | ) | 2.6 | % | ||||||
Corporate reorganization expenses | 11,032 | 9,842 | 1,190 | n/m | ||||||||||
Asset impairment | 2,889 | (372 | ) | 3,261 | n/m | |||||||||
Other (income) expense, net | (1,440 | ) | (278 | ) | (1,162 | ) | n/m | |||||||
Total costs and expenses, net | 1,883,705 | 1,864,784 | 18,921 | 1.0 | % | |||||||||
Operating income | 473,324 | 444,121 | 29,203 | 6.6 | % | |||||||||
Interest (expense) | (26,991 | ) | (25,057 | ) | (1,934 | ) | 7.7 | % | ||||||
Interest income | 2,638 | 2,194 | 444 | 20.2 | % | |||||||||
Income before income taxes | 448,971 | 421,258 | 27,713 | 6.6 | % | |||||||||
Income taxes | 122,531 | 115,088 | 7,443 | 6.5 | % | |||||||||
Net income | 326,440 | 306,170 | 20,270 | 6.6 | % | |||||||||
Net income attributable to non-controlling interests | 2,670 | 3,626 | (956 | ) | (26.4 | )% | ||||||||
Net income attributable to Tim Hortons Inc. | $ | 323,770 | $ | 302,544 | $ | 21,226 | 7.0 | % | ||||||
Basic earnings per common share attributable to Tim Hortons Inc. | $ | 2.12 | $ | 1.94 | 0.18 | 9.3 | % | |||||||
Diluted earnings per common share attributable to Tim Hortons Inc. | $ | 2.12 | $ | 1.94 | 0.18 | 9.3 | % | |||||||
Weighted average number of common shares outstanding (in thousands) – Basic | 152,379 | 155,607 | (3,228 | ) | (2.1 | )% | ||||||||
Weighted average number of common shares outstanding (in thousands) – Diluted | 152,919 | 156,247 | (3,328 | ) | (2.1 | )% | ||||||||
Dividends per common share | $ | 0.78 | $ | 0.63 | 0.15 | |||||||||
8
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands of Canadian dollars, except share and per share data)
(Unaudited)
As at | |||||||
September 29, 2013 | December 30, 2012 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 44,877 | $ | 120,139 | |||
Restricted cash and cash equivalents | 100,964 | 150,574 | |||||
Accounts receivable, net | 185,819 | 171,605 | |||||
Notes receivable, net | 6,565 | 7,531 | |||||
Deferred income taxes | 8,015 | 7,142 | |||||
Inventories and other, net | 111,930 | 107,000 | |||||
Advertising fund restricted assets | 48,722 | 45,337 | |||||
Total current assets | 506,892 | 609,328 | |||||
Property and equipment, net | 1,615,880 | 1,553,308 | |||||
Intangible assets, net | 2,943 | 3,674 | |||||
Notes receivable, net | 5,177 | 1,246 | |||||
Deferred income taxes | 11,686 | 10,559 | |||||
Equity investments | 41,304 | 41,268 | |||||
Other assets | 81,870 | 64,796 | |||||
Total assets | $ | 2,265,752 | $ | 2,284,179 | |||
Liabilities and equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 180,102 | $ | 169,762 | |||
Accrued liabilities | |||||||
Salaries and wages | 22,489 | 21,477 | |||||
Taxes | 15,599 | 8,391 | |||||
Tim Card obligation and other | 150,997 | 197,871 | |||||
Deferred income taxes | 342 | 197 | |||||
Advertising fund liabilities | 63,672 | 44,893 | |||||
Current portion of long-term obligations | 20,549 | 20,781 | |||||
Total current liabilities | 453,750 | 463,372 | |||||
Long-term obligations | |||||||
Long-term debt | 367,231 | 359,471 | |||||
Long-term debt – Advertising fund | 42,375 | 46,849 | |||||
Capital leases | 115,370 | 104,383 | |||||
Deferred income taxes | 8,466 | 10,399 | |||||
Other long-term liabilities | 115,752 | 109,614 | |||||
Total long-term obligations | 649,194 | 630,716 | |||||
Commitments and contingencies | |||||||
Equity | |||||||
Equity of Tim Hortons Inc. | |||||||
Common shares ($2.84 stated value per share), Authorized: unlimited shares. Issued: 149,122,408 and 153,404,839 shares, respectively | 422,871 | 435,033 | |||||
Common shares held in Trust, at cost: 340,314 and 316,923 shares, respectively | (14,969 | ) | (13,356 | ) | |||
Contributed surplus | 14,580 | 10,970 | |||||
Retained earnings | 868,526 | 893,619 | |||||
Accumulated other comprehensive loss | (129,228 | ) | (139,028 | ) | |||
Total equity of Tim Hortons Inc. | 1,161,780 | 1,187,238 | |||||
Non-controlling interests | 1,028 | 2,853 | |||||
Total equity | 1,162,808 | 1,190,091 | |||||
Total liabilities and equity | $ | 2,265,752 | $ | 2,284,179 | |||
9
TIM HORTONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of Canadian dollars)
(Unaudited)
Year-to-date period ended | |||||||
September 29, 2013 | September 30, 2012 | ||||||
Cash flows provided from (used in) operating activities | |||||||
Net income | $ | 326,440 | $ | 306,170 | |||
Adjustments to reconcile net income to net cash provided from operating activities | |||||||
Depreciation and amortization | 110,447 | 96,842 | |||||
Stock-based compensation expense | 17,132 | 12,722 | |||||
Deferred income taxes | (2,458 | ) | (2,387 | ) | |||
Changes in operating assets and liabilities | |||||||
Restricted cash and cash equivalents | 50,020 | 45,728 | |||||
Accounts receivable | (11,010 | ) | (2,913 | ) | |||
Inventories and other | (7,913 | ) | 26,186 | ||||
Accounts payable and accrued liabilities | (58,213 | ) | (63,430 | ) | |||
Taxes | 7,183 | (10,220 | ) | ||||
Other | 6,524 | 7,433 | |||||
Net cash provided from operating activities | 438,152 | 416,131 | |||||
Cash flows (used in) provided from investing activities | |||||||
Capital expenditures | (132,726 | ) | (112,812 | ) | |||
Capital expenditures – Advertising fund | (9,554 | ) | (46,190 | ) | |||
Other investing activities | 6,709 | (7,812 | ) | ||||
Net cash (used in) investing activities | (135,571 | ) | (166,814 | ) | |||
Cash flows (used in) provided from financing activities | |||||||
Repurchase of common shares | (242,222 | ) | (172,656 | ) | |||
Dividend payments to common shareholders | (118,579 | ) | (98,172 | ) | |||
Net proceeds from issue of debt – Advertising fund | — | 42,500 | |||||
Principal payments on long-term debt obligations | (12,901 | ) | (5,502 | ) | |||
Other financing activities | (5,601 | ) | (5,336 | ) | |||
Net cash (used in) financing activities | (379,303 | ) | (239,166 | ) | |||
Effect of exchange rate changes on cash | 1,460 | (1,586 | ) | ||||
(Decrease) Increase in cash and cash equivalents | (75,262 | ) | 8,565 | ||||
Cash and cash equivalents at beginning of period | 120,139 | 126,497 | |||||
Cash and cash equivalents at end of period | $ | 44,877 | $ | 135,062 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 23,259 | $ | 19,869 | |||
Income taxes paid | $ | 117,418 | $ | 134,815 | |||
Non-cash investing and financing activities: | |||||||
Capital lease obligations incurred | $ | 25,217 | $ | 10,864 | |||
10
TIM HORTONS INC. AND SUBSIDIARIES
SEGMENT REPORTING
(in thousands of Canadian dollars)
(Unaudited)
Third quarter ended | Year-to-date period ended | ||||||||||||||
September 29, 2013 | September 30, 2012 | September 29, 2013 | September 30, 2012 | ||||||||||||
Revenues(1) | |||||||||||||||
Canada | $ | 676,006 | $ | 672,684 | $ | 1,927,361 | $ | 1,923,928 | |||||||
U.S. | 47,019 | 39,254 | 132,687 | 120,837 | |||||||||||
Corporate services | 3,414 | 2,933 | 12,743 | 11,955 | |||||||||||
Total reportable segments | 726,439 | 714,871 | 2,072,791 | 2,056,720 | |||||||||||
VIEs(2) | 98,914 | 87,169 | 284,238 | 252,185 | |||||||||||
Total | $ | 825,353 | $ | 802,040 | $ | 2,357,029 | $ | 2,308,905 | |||||||
Operating Income (Loss) | |||||||||||||||
Canada | $ | 179,597 | $ | 171,990 | $ | 500,178 | $ | 484,576 | |||||||
U.S.(3) | 2,717 | 1,458 | 6,214 | 7,213 | |||||||||||
Corporate services | (14,325 | ) | (13,000 | ) | (26,414 | ) | (42,902 | ) | |||||||
Total reportable segments | 167,989 | 160,448 | 479,978 | 448,887 | |||||||||||
VIEs(2)(3) | 1,792 | 1,776 | 4,378 | 5,076 | |||||||||||
Corporate reorganization expenses | (953 | ) | (8,565 | ) | (11,032 | ) | (9,842 | ) | |||||||
Consolidated Operating Income | 168,828 | 153,659 | 473,324 | 444,121 | |||||||||||
Interest, Net | (8,487 | ) | (7,749 | ) | (24,353 | ) | (22,863 | ) | |||||||
Income before income taxes | $ | 160,341 | $ | 145,910 | $ | 448,971 | $ | 421,258 | |||||||
________________
(1) | There are no inter-segment revenues included in the above table. |
(2) | Variable interest entities ("VIEs"). |
(3) | The Company recognized an impairment charge of $2.9 million in the third quarter and year-to-date period of 2013 (third quarter of fiscal 2012: nil; year-to-date period of 2012 $(0.4) million) related to certain underperforming markets in the U.S., $2.5 million of which is recognized in our U.S. segment (third quarter of 2012: nil; year-to-date period of 2012: $(0.4) million), remainder recognized in VIEs. |
Consolidated Sales and Cost of sales comprise the following:
Third quarter ended | Year-to-date period ended | ||||||||||||||
September 29, 2013 | September 30, 2012 | September 29, 2013 | September 30, 2012 | ||||||||||||
Sales | |||||||||||||||
Distribution sales | $ | 473,641 | $ | 475,243 | $ | 1,373,389 | $ | 1,386,245 | |||||||
Company-operated restaurant sales | 6,090 | 7,856 | 18,567 | 20,455 | |||||||||||
Sales from VIEs | 96,049 | 85,442 | 276,273 | 248,915 | |||||||||||
Total Sales | $ | 575,780 | $ | 568,541 | $ | 1,668,229 | $ | 1,655,615 | |||||||
Third quarter ended | Year-to-date period ended | ||||||||||||||
September 29, 2013 | September 30, 2012 | September 29, 2013 | September 30, 2012 | ||||||||||||
Cost of sales | |||||||||||||||
Distribution cost of sales | $ | 411,290 | $ | 414,439 | $ | 1,185,862 | $ | 1,214,611 | |||||||
Company-operated restaurant cost of sales | 6,207 | 8,042 | 19,830 | 21,819 | |||||||||||
Cost of sales from VIEs | 84,359 | 75,136 | 246,610 | 219,007 | |||||||||||
Total Cost of sales | $ | 501,856 | $ | 497,617 | $ | 1,452,302 | $ | 1,455,437 | |||||||
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TIM HORTONS INC. AND SUBSIDIARIES
Income Statement Definitions
Sales | Sales include Distribution sales, sales from company-operated restaurants, and sales from consolidated Non-owned restaurants. Distribution sales comprise sales of products (including a minimal amount of manufacturing product sales to third parties), supplies, and restaurant equipment outside of initial restaurant establishment or renovations (see “Franchise Fees”) that are shipped directly from our warehouses or by third-party distributors to restaurants or retailers through our supply chain. Sales from company-operated restaurants and consolidated Non-owned restaurants comprise restaurant-level sales to our guests. The consolidation of Non-owned restaurants essentially replaces our rents and royalties with restaurant sales, which are included in VIEs’ sales. |
Rents and royalties | Includes royalties and rental revenues earned, net of relief, and certain advertising levies associated with our Canadian Advertising Fund relating primarily to the Expanded Menu Board Program. |
Franchise fees | Includes license fees and equipment packages, at initiation of a restaurant and in connection with the renewal or renovation, and revenues related to master license agreements. |
Cost of sales | Cost of sales includes costs associated with the management of our supply chain, including cost of goods, direct labour and depreciation, as well as the cost of goods delivered by third-party distributors to restaurants for which we manage the supply chain logistics, and for canned coffee sold through grocery stores. Cost of sales also includes food, paper and labour costs of Company-operated restaurants and consolidated Non-owned restaurants. |
Operating expenses | Includes rent expense related to properties leased to restaurant owners and other property-related costs including depreciation. Also included are certain operating expenses related to our distribution business such as warehouse technology costs and utilities, and product development costs. |
Franchise fee costs | Includes the cost of equipment sold to restaurant owners at the commencement or in connection with the renovation of their restaurant business, including training and other costs necessary to assist with a successful restaurant opening, and/or the introduction of our Cold Stone Creamery® co-branding offering into existing locations. Also includes support costs related to project-related and/or operational initiatives. |
General and administrative expenses | Includes costs that cannot be directly related to generating revenue, including expenses associated with our corporate and administrative functions, depreciation of head office buildings and office equipment, and the majority of our information technology systems. |
Corporate reorganization expenses | Includes termination costs and professional fees related to the implementation of our new Corporate Centre and Business Unit organizational structure, as well as CEO transition costs. |
Equity income | Includes income from equity investments in partnerships and joint ventures and other minority investments over which we exercise significant influence. Equity income from these investments is considered to be an integrated part of our business operations and is therefore included in operating income. |
Other (income) expense, net | Includes (income) expenses that are not directly derived from the Company's primary businesses, such as foreign currency adjustments, gains and losses on asset sales, and other asset write-offs. |
Net income attributable to non-controlling interests | Relates to the consolidation of Non-owned restaurants pursuant to applicable accounting rules. |
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